Be Prepared

There are times that the markets ebb and flow and then there are times when they go to extremes. By studying the charts, we can often be prepared for good trading opportunities that can come from many of these situations. Lets discuss what the charts are currently saying, especially in Precious Metals…

First : In the past I have pointed out what the Vix at 12 can often lead to.  Notice that when the VIX hits 12 &  rises  (top box) , the markets pull back  (middle box).

In my weekend report, I mentioned with this July 17 chart that I expected the markets to drop.  If the QQQ Gapped open, I said to sell it. 

Now we see this…

 

In after hours,  AAPL was down over $10 after its earnings release, trading at the Blue X.   Wednesday Morning it is down $7.  Will this affect the markets? Will the “buy The Dips” crowd come to the rescue? According to the VIX,  the markets may begin to dip.

SPX – After a nice rally out of the lows, there have been a couple of topping type candles.  It may need a rest. Watch the 50sma.

 

NASDAQ – also  shows signs of stalling here and a pullback is likely.

TRAN–  Stalls at the 50sma.   The trannies never enjoyed that rally to former highs and the SOX did not either.

Summary :   SO I am not talking about a crash here, we’ll take it one step at a time.  The recent sell off into the LOWS for the markets should produce a bit more of a rally in my opinion.  What I would “Guess” is that we see the SPX pull back a bit  ( the VIX will bounce) and then the SPX may try to break to new highs again, as the Vix drops again. From there,  we’ll have to wait and see.    It could look like this inverse H&S.

$USD–  I have been saying for 2 weeks that the dollar would likely turn at 98.  This was July 13

$USD – turned down Tuesday.

 

$WTIC – I have not been bullish on OIL for weeks, it remained weak as expected.   Suddenly this chart looks more Bullish with divergence.  It looks like it may pop, there is divergence at new lows.  I did say that OIL could run and tag the 20sma or the 50sma. Now it looks like it may ( maybe because the dollar is dropping?).  A break above the down trend line and I might buy UWTI.  ( Honestly, I am a bit more interested in Miners though). 

$NATGAS– I have been bullish on Natgas.  It is still a proper set up.

 

GOLD SILVER & MINERS

Lets continue our discussion as to how this sector could play out going forward.    There is always more than 1 way that things could go, so I need to discuss a few  possibilities to help us “Be Prepared”.  Due to Cycle timing,  the selling has likely run its couse, but there could be one more final Slam down & reversal.  THAT is why I havent mentioned buying yet, other than maybe cautiously starting small positions.  Lets explain- 

GOLD – Tuesday gold popped and dropped and lingered at lows so far. It was day 31, and cycle-wise a Low can come NOW or SOON.  I really actually wanted to see an “undercut” of Mondays lows, similar to March or Nov. A final stop run to scare people out.

 

Please note NOV 2014 ICL  ( lows) .  That may be what we have now.   Lets call it  SLAM/PAUSE/REVERSAL.  The slam down was Monday for us now,  a “pause” for one day like today , and a flash drop below the long sell off candle  (Wednesday?) .   Gold SLAMMED Monday, Paused Tuesday , falls Wednesday???  Are you ‘prepared’ for that possibility?   THAT reversal would be a buy.

Silver  –  Tuesday Silver  undercut its slam down candle , but it rallied 2 weeks ago before undercutting the slam down lows.   I dont think we have time for Gold to do this.   Silvers lows may be in.

Here is 1 dilemma:  Using cycles , you are supposed to buy a reversal, but only after it breaks higher than the candle that is considered The Low.  IF this slam down candle is the lows, you arent supposed to buy until price is over that candles high.   THAT is $30 or $40 higher.    ( I will not wait for that anyways,  I may just go by SILVERS swing ).

So to clarify that dilemma –  I actually would like to see a dip below that candle Wednesday & a reversal.  That would make it GOLD DAY 33 Low.   I would buy that.    Then a move above THAT candle is the buy for Cycle guys. It would look like this, and be much clearer.

MINERS-

I drew this Monday and didnt use it. I was showing how GDX could slam down for 2 or 3 days  ( like past ICL’s shown ) . Then “pause” at the lows.  Now look at NOV lows.  Even Miners can slam down , then pause or rally, then slam and undercut to shake out weak hands.  THIS is also why I havent mentioned buying yet. This stops people out and they get frustrated when it turns higher. 

Were you prepared for this possibility?   You are now.  I think Lows are pretty much in.

 

 

THAT is also why I wrote a whole part in yesterdays report about how price can linger at the lows , so dont jump “All in” feeling like you are missing out.  I have started a position, because I know these risks, but I also have dry powder in case we undercut the lows.

 EX:  I showed this chart. It is a rare BUY signal at the close of the day , and I started a position at the close of this day Monday.  This low of GDX  $13.78  CAN be undercut.   That same BUY came in NOV , and then it got slightly undercut .  No biggie, it then went higher.

More observations.  GDX bounced and sold off today, many in blogs were posting that they are “Weak” and ready to landslide.  Look at the candle at the exact Nov lows. It rallied and sold off. The next day gapped up & lows were in.   SO do we have lows?   Or do we undercut  the current lows? Either way,  I think we go higher soon, based on the blue chart above.  

 

How about another possibility?  Less likely, but if it happens, I want us to ‘be prepared’.  Have you ever seen an ISLAND BOTTOM REVERSAL?   It is very bullish.  A gap down lingers, but GAPS back higher.  They run strongly.

  If Miners climb higher and then GAP up at the area of the Gap down that we just saw?  I would add full position  if you are not in at that point.   GDXJ could look like this.

 

How about 1 more scenario.   This is the one where we sell off and undercut the lows in a scary way. It starts with GDX & Tuesdays  little candle where we rallied and gave it up.

 

An example is here, Notice a similar candle on this sell off

 

What does it mean if it sells off Like THIS Wednesday?!!   WOW!!  Sold off like CRAZY, but then reversed sharply. Buy the reversal?   YES-  shorts got trapped and have to cover and buyers are overwhelming with demand.

 

BUY that reversal!!

Yes, that above chart was a sell off  in a Bull market.  That means that the BUY THE DIP  team was strong.  Even so,  any strong sell off in Miners accompanied by a reversal Wednesday will be a buying opportunity.  Again,  everyone has to trade according to their own risk tolerance.   Start small if your risk tolerance is low.  Build a position as we leave the lows and remember, sometimes the price just lingers at the  lows. 

See yesterdays report for many charts like this, showing how price often just stayed at the lows until weak hands were shaken out.

 

 

SO I just wanted to take this time to show that there are several possibilities as to how this could play out, but we are Very close to having our ICL  (Trade-able Lows).  Actually, we are either on day 32 of Gold,  or we may be on day 2 today of a New Cycle.  I expect a summer rally to unfold from these lows soon.

Summary:  I expect the Markets to sell off, but probably not a whole lot at this point.  I will watch the Vix  rise,  it often stops at 20, but may not have that kind of bounce here.  I also expected the dollar to drop, but Gold didnt really bounce.  Maybe The $USD  rises again and does a mini double top at $89, and Gold would then do a double bottom, and shake any new buyers out?   We’ll have to see how this all unfolds, but I have given you many ideas to watch for.  Especially   so that you are prepared for a low that I am expecting to be forming in this Gold sell off.  Thanks for being a chartfreak reader, I appreciate everyone being here.

 

~ALEX

P.S. For Traders, I have noticed some bullish movement in Uranium stocks, Shipping stocks, and the Biotech Pharma stocks that I have mentioned in the past. I didnt have time to draw up too many charts, I have been very focused on the coming Gold /Silver/Miners trade.   Experienced Traders can be looking at double bottoms with higher lows,  pull backs to buy at low risk points, like the 50sma ,etc –

  Uraniums like  UEC, URRE are interesting double bottoms   ( Note : URG & DNN sold off deeply)

 

Pharma/ Biotech   I think IDRA  (as shown before,  sitting right on the 50sma )  may be ready to move higher.   ZIOP– shown weeks ago has moved higher and now looks ready again.

ZIOP – a slow mover ,but setting up nicely

 

   Shippers:  benefiting from shipping or storing OIL, some have experienced a nice run ( see 1 yr charts of GSL, TNK, etc ) they are starting to pop or run.     Look at PRGN.  See how   FRO, NM, SB,  are starting to run?  Maybe wait for a pullback or watch a  a lagger for a low risk entry,  like  DRYS ,TNK, DHT.  TEU on a 1 yr chart is in an uptrend, but its under $1  (some dont like that).

SB – looks like NM, breaking above the 50sma from a base

PRGN –  Nice pop & run, a pullback may be a buy